Gold halts three-day decline as slump boosts investor demand

Gold gained for the first time in four days in New York as prices near a four-month low spurred buying and on speculation of increased demand from China.

Bullion slumped to a four-month low on Jan. 4 after minutes from the Federal Reserve showed that policy makers may end $85 billion in monthly bond purchases some time this year. Gold imports by China from Hong Kong almost doubled in November from a month earlier, government data show. The U.S. Mint sold 71,500 ounces of American Eagle gold coins so far this month, compared with a total of 76,000 ounces in December, its website shows.

“Market players have evidently been taking advantage of the lower prices recently to purchase gold,” analysts at Commerzbank AG wrote today in a report. “The Chinese New Year festival at the beginning of February is likely to have lured buyers into the market. The currently robust physical gold demand in China should have a bolstering effect on prices.”

Gold for February delivery rose 0.4 percent to $1,653.30 an ounce by 7:47 a.m. on the Comex in New York. Prices reached $1,626 on Jan. 4, the lowest since Aug. 21. Gold for immediate delivery added 0.4 percent to $1,653.71 in London.

Mainland China bought 90,764 kilograms (90.764 metric tons) in November, including scrap and coins, compared with 47,478 kilograms in October, data from the Census and Statistics Department of the Hong Kong government show. Volumes for bullion of 99.99 percent purity on the Shanghai Gold Exchange surged to 19,504.8 kilograms yesterday, according the bourse’s website. That’s the highest ever for the benchmark contract, according to data tracked by Bloomberg.

ETP Holdings

Holdings in gold-backed exchange-traded products were at 2,622.3 tons yesterday, about 0.4 percent below the record set Dec. 20, data compiled by Bloomberg show. Prices gained for a 12th consecutive year in 2012 as central banks from the U.S. to China pledged more steps to spur economic growth.

Japanese pension funds, the world’s second-largest pool of retirement assets after the U.S., will more than double their gold holdings to 100 billion yen ($1.1 billion) by 2015 as the new government pushes for a higher inflation target, said Itsuo Toshima, an adviser to the funds.

Japan’s central bank next meets on Jan. 21-22. Finance Minister Taro Aso said today that the nation will use foreign- exchange reserves to buy European Stability Mechanism bonds. Prime Minister Shinzo Abe said on Jan. 1 that a “bold” monetary policy is one of the three prongs of his economic plan.

Silver for March delivery rose 0.8 percent to $30.325 an ounce. Platinum for April delivery was up 1 percent at $1,572.50 an ounce. Palladium for March delivery gained 0.6 percent to $674.25 an ounce, after reaching $663.20 yesterday, the lowest since Nov. 28.